Meloy v. Conoco, Inc.

• Decision Date: 06 April 1987
• Docket Number: No. 86-CQ-1466,86-CQ-1466
• Citation: 504 So.2d 833
• Parties: Robert Earl MELOY, et al. v. CONOCO, INC. v. OILFIELD SERVICES OF CAMERON, INC.
• Court: Louisiana Supreme Court

Page 833

504 So.2d 833

Robert Earl MELOY, et al. v. CONOCO, INC. v. OILFIELD SERVICES OF CAMERON, INC.

No. 86-CQ-1466.

Supreme Court of Louisiana.

April 6, 1987.

Gregory P. Massey, Jones, Tete, Nolen, Hanchey, Swift & Spears, Lake Charles, for defendant-appellant.

Joseph W. Looney, George B. Jurgens, III, Milling, Benson, Woodward, Hillyer, Pierson & Miller, P.C., New Orleans, for amicus curiae.

Rudie Ray Soileau, Jr., Scofield, Bergstedt, Gerard, Mount & Veron, P.C., Lake Charles, for plaintiff-appellee.

MARCUS, Justice.

Pursuant to La.R.S. 13:72.1 ¹ and Rule XII of the Supreme Court of Louisiana, ² the United States Court of Appeals for the Fifth Circuit has certified the following questions of law to this court: ³

(1) Under Louisiana law, is an indemnitor's obligation to defend a suit against the indemnitee for personal injuries sustained by an employee of the indemnitor determined entirely by the allegations of the complaint against the indemnitee? That is, if the petition against the indemnitee alleges only that the indemnitee was at fault, does the indemnitor have a duty to defend (assuming the indemnity agreement is interpreted to include costs of defense)?

(2) If the indemnitor does not have a duty to defend the suit, but if, after trial on the merits, the indemnitee is found free from fault and the injury is found to have resulted in whole or in part from the fault of the indemnitor, is the indemnitee entitled to recover its cost of defense?

(3) If an indemnity agreement is covered by the Louisiana Oilfield Indemnity Act of 1981, La.Rev.Stat.Ann. § 9:2780, does the Act nullify completely an indemnity contract that obligates the indemnitor to indemnify the indemnitee regardless of which party is at fault? Or is the agreement valid to the extent it requires indemnification for damages attributable to the comparative fault of the indemnitor?

As Rule XII requires, the certificate includes a statement of facts showing the nature of the cause and the circumstances out of which the question of law arises:

Robert Meloy, an employee of Oilfield Services of Cameron, Inc., was allegedly injured in June 1983 in an accident aboard Conoco's offshore production platform situated in the Gulf of Mexico more than three miles off the coast of Louisiana. Meloy and his wife sued Conoco for damages in federal court asserting jurisdiction under the Outer Continental Shelf Lands Act, 43 U.S.C. § 1333(b). Conoco filed a third-party claim against Oilfield Services for defense and indemnity pursuant to an agreement that had previously been made between Conoco and Oilfield Services.

In March 1979, Conoco and Oilfield Services had entered into a blanket agreement containing a defense and indemnity provision that is reproduced in full in the footnote. ⁴ In May or June 1983, Conoco directed Oilfield Services to sandblast and paint its offshore production platform in accordance with the blanket agreement of March 1979. It was during the performance of this work that Meloy was injured. Oilfield Services resisted Conoco's third-party demand on the ground that the Louisiana Oilfield Indemnity Act of 1981, La.Rev.Stat.Ann. § 9:2780, barred Conoco's claim for indemnity under the blanket agreement. The district court concluded that Louisiana law controlled and granted Oilfield Services' motion for summary judgment. Conoco appealed, and this panel [of the Fifth Circuit Court of Appeals] affirmed. ⁵ In rejecting Conoco's claim for costs of defense, we [the Court of Appeals for the Fifth Circuit] held that under Louisiana law the indemnitor's obligation to defend is an issue that must be determined entirely by the allegations of the precipitating pleadings. Because Meloy did not allege fault on the part of Oilfield Services, the indemnitor, there was no duty to defend. We also held that, even if Conoco were found free of fault after trial on the merits and the injury were found to have resulted in whole or in part from the fault of Oilfield Services, Conoco still would be unable to recover its cost of defense. We also rejected Conoco's interpretation of the Oilfield Indemnity Act as not affecting an indemnity agreement to the extent that it requires the indemnitor (Oilfield Services) to indemnify the indemnitee (Conoco) for damages resulting from the indemnitor's negligence or fault in causing injuries to an employee of the indemnitor (Meloy).

The questions certified to this court raise two issues: (1) the extent to which the Louisiana Oilfield Indemnity Act of 1981 ⁶ prohibits indemnification agreements in contracts relating to oilfield operations; and (2) whether the allegations of the complaint govern the indemnitor's obligation to defend, and if not, whether the indemnitee can recover its cost of defense after trial on the merits.

We first address the nature of the prohibition against indemnity contracts found in the Louisiana Oilfield Indemnity Act (Act). The Act has not been interpreted uniformly by the federal district courts which have considered it. Some courts have held that the Act voids totally any indemnification clause in any contract to which the Act applies while other courts have found that the Act bars indemnification only to the extent of an indemnitee's own fault and that the Act allows indemnification for the proportionate fault of the indemnitor. Our interpretation of the Act must be guided by the language of the statute and the legislature's intent in enacting it.

In construing a statute, the primary object is to ascertain and, if possible give effect to the intention and purpose of the legislature as expressed in the statute. Since the meaning is to be determined from a general consideration of the act as a whole, all parts, provisions or sections must be read together; each must be considered with respect to, or in the light of, all the other provisions, and construed in harmony with the whole. The intent as deduced from the whole will prevail over that of a particular part considered separately; meaning should be given, if possible, to each and every section, and the construction placed on one portion should not be such as to obliterate another; so, in determining the meaning of a word, phrase or clause, the entire statute is to be considered.

Fruge v. Muffoletto, 137 So.2d 336, 339 (La.1962). Laws must be interpreted to give them the connotation that the lawmaker obviously intended. Smith v. Flournoy, 115 So.2d 809, 814 (La.1959).

The relevant portion of La.R.S. 9:2780 provides as follows:

A. The legislature finds that an inequity is foisted on certain contractors and their employees by the defense or indemnity provisions, either or both, contained in some agreements pertaining to wells for oil, gas, or water, or drilling for minerals which occur in a solid, liquid, gaseous, or other state, to the extent those provisions apply to death or bodily injury to persons. It is the intent of the legislature by this Section to declare null and void and against public policy of the state of Louisiana any provision in any agreement which requires defense and/or indemnification, for death or bodily injury to persons, where there is negligence or fault (strict liability) on the part of the indemnitee, or an agent or employee of the indemnitee, or an independent contractor who is directly responsible to the indemnitee.

B. Any provision contained in, collateral to, or affecting an agreement pertaining to a well for oil, gas, or water, or drilling for minerals which occur in a solid, liquid, gaseous, or other state, is void and unenforceable to the extent that it purports to or does provide for defense or indemnity, or either, to the indemnitee against loss or liability for damages arising out of or resulting from death or bodily injury to persons, which is caused by or results from the sole or concurrent negligence or fault (strict liability) of the indemnitee, or an agent, employee, or an independent contractor who is directly responsible to the indemnitee.

La.R.S. 9:2780 was passed in response to the concern of oilfield contractors over the widespread inclusion of indemnification agreements in the master service contracts which oil companies require all contractors to sign. ⁷ The indemnification provisions exposed contractors to both worker's compensation and tort liability. Louisiana Oilfield Contractors Association (Amicus Curiae) contends that because these contractual indemnification agreements were inherently adhesive in nature due to the unequal bargaining position between the parties, the legislature enacted the Louisiana Oilfield Indemnity Act, La.R.S. 9:2780.

Section A of the Act states that the defense and indemnity provisions in certain contracts relating to the drilling industry are inequitable to some oilfield contractors. It declares that the intent of the legislature is to declare null and void and against public policy "any provision in any agreement which requires defense and/or indemnification for death or bodily injury to persons where there is negligence or fault (strict liability) on the part of the indemnitee...."

After this statute was passed by the 1981 Regular Session of the Legislature, the wording of Section B of the Act apparently raised concerns that it might be interpreted to void an oil company's entire master service contract rather than only the offending indemnity and/or defense provisions. ⁸ The 1981 Special Session of the Legislature amended Section B to make clear that the Act was intended to void only the indemnity and/or defense portion of a contract and not the entire contract. The word "provision" was substituted for the first reference to "agreement" in Section B and the phrase "to the extent that it purports to or does" replaced "if it purports to." 1981 La.Acts, Ex.Sess., No. 33. These changes make it clear that master service contracts are not voided by the Act. The Act nullifies only those contractual provisions that provide for defense or indemnity...